Strategic Value Added: Navy-Industry Cooperation for the Future

The job of the Department of the Navy is to deliver a quality and cost-effective defense for America. My role as the Secretary is to ensure that quality Naval forces are trained, equipped and provisioned for service in harm's way. How to balance competing requirements and come up with a quality product is the problem all of us are facing in the current defense environment.

The solution for the Navy lies in fostering a relationship of mutual respect, innovation and cooperation with all the levels of the shipbuilding industry (e.g. shipbuilders, ship repairers and ship suppliers). Working closely with the industry, the Navy is implementing a concept that could be defined as "Strategic Value Added" to ensure American taxpayers are getting the best possible strategic return on their tax dollar.

Navy-industry cooperation is not something to be taken for granted. In the past this "cooperation" was often defined by the government setting a fixed amount for Research and Development on a specific program and industry picking up the rest of the tab as a prerequisite if they wanted to participate. The shipbuilding industry will find that with the Navy's awareness of a shrinking shipbuilding industrial base — our definition of cooperation has undergone a vast change.

It will be a more cooperative environment. Both the industry and the Navy must be more cooperative if we are going to improve quality, reduce cost and preserve our military and industrial base.

This newfound spirit of cooperation should be centered on the concept of "Strategic Value Added." Both the Navy and industry must look closely at the Navy's requirements based on ill-defined post-Cold War threats and a new strategy that projects Naval power "... From the Sea." There are many tough decisions to make about what will truly add value to the Navy's strategic capabilities. When focused on shipbuilding, the concept of "Strategic Value Added" takes the shape of one major initiative: the Ptesidenfe Strengthening America's Shipyards: A Plan for Competing in the International Market. Under the guidelines of this plan, there are two notable programs: The Advanced Research Projects Agency (ARPA) program known as the Technology Reinvestment Project (TRP), and MARITECH, a $40 million joint dual use program in the FY '95 budget request.

Both of these programs are geared towards preserving our nation's shipbuilding industrial base. For example, the MARITECH program aims to develop and implement technologies for U.S. shipyards to design, market, produce and support commercial ships. The program seeks to integrate shipbuilding technologies to enhance overall U.S. productivity. During FY '95 the Navy will initiate a new dual-use program with the office of the Secretary of Defense and the White House.

This $50 million program is different from the successful Technology Reinvestment program managed by ARPA. The new program is focused on developing partnerships with industry and academia to identify and further develop the emerging technologies that are needed for improving or developing new products for future commercial markets and military systems. The key to each of these programs is their focus on the critical need to revitalize the commercial shipbuilding industry, encourage acquisition reform, and maximize dual-use technology. By implementing the President's plan, it will be possible to minimize the impact of the expected decline in shipbuilding contracts during the next few years while preserving our shipbuilding industrial base. If implemented with foresight, these initiatives should help the American shipbuilding industry expand their customer base beyond the Navy. Doing so is critical not only for the industry but also for our nation's economy and national security. The results of the Bottom-Up Review clearly indicated that the U.S.

must maintain its shipbuilding capabilities. The Navy's FY '95 Budget Request of approximately $5.6 billion for shipbuilding demonstrates our determination to do just that. Looking beyond the FY '95 request, our support for CVN 76, SSN 23 (third Seawolf) submarine, the New Attack Submarine, much needed sealift vessels and surface combatants will establish a Navy that will take us into the 21st Century. Given our global commitments and our global strategy we will need all of these capable ships to recapitalize and modernize our fleet. However, it is no secret that we cannot preserve our shipbuilding industrial base at the Cold War level.

The next few years of shipbuilding will appear modest in numbers, The next few years of shipbuilding will appear modest in numbers, but..it does represent a covenant with the industry that the Navy will maintain the shipbuilding skills our nation has worked so hard to develop.

but one must look closely at what it is the Navy is proposing to build. In FY '95 we ask for only four ships, but one of them is CVN 76. I am personally fighting hard for full funding for CVN 76, because it is the right thing to do for our nation. In FY '96, we plan to ask for only five ships, but one of them is LPD-17, an advanced amphibious assault ship, and another is the third highlyc a p a b l e Seawolf submarine. In FY '98, one of the six ships we expect to request is the New Attack Submarine. Throughout the next five years, we hope to build three new Aegis destroyers a year. By 1999 we are ramping up to a total of seven ships peryear. Although the plan indicates a decline in actual contracts, it does represent a covenant with the industry that the Navy will maintain the shipbuilding skills our nation has worked so hard to develop.

Many companies recognized long ago that it would be necessary to implement their own "right-sizing" plans. The one thing I want the shipbuilding industry to know is that we are deeply concerned about the long-term health of the defense industrial base. No one in the Department of Defense (DOD) is cavalier about the industry's prospects for future success. We know how much "right-sizing" is affecting industry, but shaping our forces for the threats of the post-Cold War world is essential for the long term economic health of America, and it's the right thing to do. My job is to see that it is done right.

Doing it right means remaining committed to keeping our submarine industrial base and aircraft carrier-building base alive despite recent slowdowns in acquisition. We recognize that we must maintain a capacity for building submarines and carriers — those are simply not areas we can start from scratch. Preserving our shipbuilding industrial skills is tied directly to our overall recapitalization strategy. While I do think our current programs —when combined with maintenance contracts — are sufficient to preserve a portion of our industrial capacities, long-term capitalization is necessary for maintaining a healthy, albeit smaller, industrial base. Freeing future funds for recapitalization requires us to make continuing cuts in Department of the Navy infrastructure. This, of course, is linked to the closure of the naval bases and shipyards identified by the Base Realignment and Closure Commission (BRAC). These times of base closures and shrinking defense budgets are difficult for both the Navy and the industry.

We would prefer to minimize the loss of jobs and businesses, but the bottom line is that we simply cannot maintain a level of infrastructure that is too big for the fleet it supports. That is simply not adding value for the taxpayer; it is in fact, significantly diminishing the strategic return on the dollar, and puts our recapitalization program and the preservation of the industrial skills base at risk. Reducing the Department's infrastructure is a key prerequisite of our recapitalization strategy.

Another element of the Navy's recapitalization strategy that will determine our success in future defense acquisition will be our ability to reduce the acquisition cycle time, which, in turn, controls overhead costs. DOD is scrutinizing acquisition policy and making every attempt to streamline and simplify what has become a cumbersome, inefficient system. The acquisition cycle time must be reduced. The Navy is looking to apply the principles and lessons learned from reducing cycle times for maintenance to reform our acquisition process. Everyone agrees that the process takes too long, has too many rules and costs both the Navy and industry too much.

Navy-industry cooperation represents a crucial link between a healthy economy reinvigorated by industrial competitiveness and a strong defense. At the heart of competitiveness in today's marketplace is the concept of adding value.

We will only be able to add strategic value to today's Navy by safeguarding the interests of "the Navy after next" — the Navy that will exist well into the 21st Century. In order to succeed, the Navy and industry must work together to preserve our shipbuilding base by making it competitive in the global economy.

The recapitalization of the Navy and the revitalization of commercial shipbuilding are integral elements of the administration's plan to lay the foundation for "the Navy after next." The strength of our nation's defense is inextricably linked to the strength of our shipbuilding industry. This is how I picture our true national security — as a product of a strong defense and a globally competitive industrial base.